Aspects of contract and negligence in business
The purpose of this particular assignment is to put forward the various related aspects of contract and negligence is the frequently evident within the business related issues. Hence in compliant with the task requirement emphasis shall be given to produce a report identify the various elements of contract along with an elaborated note on the principles of liability in negligence in business. Apart from this focus shall also be given to put forward an analytical review based on the cases and scenarios cited in the given assignment. .
At present age formation of contract is a commonly practised phenomenon and in most of the cases the contract formed between the involved parties is in written. Therefore a contract can be explained as a legal agreement between the contracting parties with an intention to perform as committed and is also enforceable by law. Important to highlight that an agreement made between the parties being enforceable by law reflect a wider scope compared to a contract formed. Therefore, all contracts are agreements but all agreements are not contracts. Contracts serve as a protection gear for the companies as a b reach in contract are subjected to legal penalties (Cracknell, 2001).
Elements of contract:
A contract is considered as valid when the elements of contract have been incorporated. Below are the major elements of contract.
Offer and acceptance:
A valid contract is always initiated by an offer that is subsequently followed by an acceptance to the offer. The individual or party giving the offer is known as the offeror while the party accepting the offer is considered as the offeree. Hence for a contract to be established, lawful offer must have conveyed by one party and lawful acceptance must in initiated by the other party. Importantly for the offer and acceptance to the offer during the process of contract formation ‘meeting of minds’ is mandatory (Krishnan, 2000).
Intention to establish a legally validated contract:
A contract cannot be legally established in absence of intention within the parties to form the contract. Agreements of social or domestic nature are not considered to own any legal relations. The case of Balfour versus Balfour (1919) can be reviewed in this respect (Krishnan, 2000).
Considerations are identified as the pivotal players in formation of a legally valid contract and it can be known as ‘quid pro-quo’ or something in return. Hence consideration in this respect can be explained as a recompense given by the involved contracting parties. Pollock has defined ‘consideration is the price for which the promise of another is brought (Krishnan, 2000).
In order to establish a legally validated contract it is mandatory for the parties to own a capacity to enter into the contract. An individual below the age of 18 years do not own the capacity to enter into a contract. Moreover an individual with mentally retardation, individual disqualified by law to which they are subject also do not bear the capacity to enter into a contract (Krishnan, 2000).
Presence of mutual consent is another key element for a contract to be formed. In accordance to section 14 of the English contract law consent should be free when it is not caused by undue oppression, undue influence, fraudulent activity, misinterpretation or by mistake (Krishnan, 2000).
Lawful object/ certainty:
In a valid contract agreement it is mandatory to have an object or the purpose of the contract. Important to convey that an object is unlawful when it is prohibited by law, fraudulent, involves harm to an individual or property and if the judiciary body consider is as immoral or opposed to public policy.
Possibility of performance:
A contract is not considered to be legally valid if the concerned act is impossible in itself, physically or legally and hence it cannot be enforced by law.
Not declared to be void:
A contract formed becomes legally validated if it is not expressly declared as void by any law. Section 24 to 30 of the English contract law has legal guidelines for expressly declaring a contract void.
Types of contract:
There exist four major types of contract in accordance to the contract law. They are: on the basis of formation, on the basis of nature of consideration, on the basis of execution and on the basis of validity.
Contract on the basis of formation are again segmented into:
Express contract: Where there is expression or conversation
Implied Contract: Where implied terms are more prominent
Quasi contract: In this contract type there is no offer or acceptance and the contract is established by virtue of law. Section 68-72 of the English contact law produces the legal guidelines for quasi contact formation.
Contract on the basis of nature of consideration are:
Bilateral contract: Considerations are present in both directions are to be moved after the contract.
Unilateral contract: Consideration move in one direction only after the contract.
Contract on the basis of execution:
Two major subtypes: Executed contracts and executory contract. If the required performed in the contract is accomplished it is called executed contract and in cases where contractual obligations are yet to be accomplished are known as executory contract (McKendrick, 2005).
Contract on the basis of validity:
Valid contract: A contract enforceable by law is considered as a valid contract. Consensus ad idem, certainty, free consent are the major elements of such a contract.
Void contract: A contract cannot be enforceable by law are void contract and such contract are devoid of free consent and legal formalities.
Voidable contract: A contract lacking free consent is voidable contract.
Illegal contract: Presence of unlawful object makes a contract illegal in nature.
Unenforceable contract: Contracts that cannot properly fulfil the legal formalities are known as unenforceable contract (McKendrick, 2005).
Terms of a valid contract:
The major terms of a valid contract comprise of condition, warranty and intermediate terms. A condition that is considered as one of the most significant contractual term, form the basic to the principle reason for the agreement. If the conditions made within a contract is not performed by any one of the contracting parties a breach is contract is resulted. Important to highlight that a condition is an act that directly influence the contractual duty of the involved party and hence it can be considered as a qualification that is placed on an obligation. The case of Poussard versus Spiers (1876) can be cited in this respect (E-lawresources.co.uk, 2016).
On the other hand warranties being less important term ins a contract are considered not central to the existence of the contract. Important to note that a breach in warranty do not make the injured party entitled to terminate the contract but can claim compensation for the damages caused. The case of Bettini versus Gye (1876) can be cited as an example (swarb.co.uk, 2016).
Innominate terms were developed as contractual term following the case of Hong Kong Fir shipping. This particular contractual term looks to the effect of the breach and also questions whether the injured party was deprived substantially or from the whole benefit of the said contract.
Exclusion clause being one of the important term, with respect to a contract formation and is accountable in limiting the liabilities of the breaching party from the damages cause. True exclusion clause, limitation exclusion clause and time exclusion clause are the major variants in this respect (McKendrick, 2005).
Expressed terms are expressly mentioned in the contract formed and both the parties remain aware about it. On the contrary the implied terms are not mentioned in the contract but the contracting parties should remain informed regarding such terms.
The referred case is about Carbolic smoke ball Company’s advertisement wherein it was stated that 100 pounds will be rewarded from the company to any individual who contracts the increasing epidemic influenza, cold or any disease resulted by taking cold and after using the ball three time daily for two weeks. The claim ant of this case Mrs. Carlill purchased one of the balls and after using it as per direction caught flue and claimed the reward. The company however refused to reward her (Australiancontractlaw.com, 2016).
The decisions of the court were in favour of Mrs. Carlill. The court identified the contract as unilateral that comprised of both offer and acceptance to the offer. It was also ensured that the offer was valid as it was not a mere sales puff and the language of the advertisement was not too vague to be enforced. The court also pointed that that although communication of acceptance is requirement but in this case Mrs. Carlill did not need to communicate the acceptance and acceptance to the offer occurred through performance of the requested acts as mentioned in the advertisement (Australiancontractlaw.com, 2016).
The cited case hence clearly indicated that consideration was present with respect to the unilateral contract. In this case the inconvenience suffered by the claimant after using the smoke ball as per direction can be identified as the consideration. Apart from this carbolic smoke ball obtained a benefit in having people use the smoke ball. Furthermore the referred case has also reflected an intention to create legal relation wherein the case has exemplified rebuttal disproving a presumption (Horsey and Rackley, 2009).
The case of Brogden versus Metropolitan railways (1877) can be reviewed that inferred acceptance to an offer can communicated by conduct (swarb.co.uk, 2016). Another case of Ramgate Victoria hotel versus Montefior (1866) can be cited that depicted the legal principle of acceptance to an offer must be made within a reasonable time (E-lawresources.co.uk, 2016). Hence in the case of Carbolic smoke ball company, the acceptance to the offer for the unilateral contract was made by Mrs. Carlill through her conduct and that too within a reasonable time period.
In this case the defendant offered to sell a farm to the claim for £1,000 and claimant replied with an offer to purchase the farm for £950. However the claimant subsequently sought and accepted the original offer and agreed to purchase the farm for £1,000. But the defendant refused to sell the farm to the claimant.
This case reflected a situation where a counter offer was made by the claimant that effectively is a rejection of the original offer. Hence once rejected an offer cannot be revived by subsequent acceptance to the original offer. In this case the defendant was not found guilty (Australiancontractlaw.com, 2016).
On legal aspect counter offer and refusal are the procedures that terminate an offer. However a response to a request for information cannot be considered as an offer. The case of Harvey versus Facey (1893) can be cited in this respect (Casebrief.me, 2016). Furthermore in alignment with the case cited in case b, the example of Normile versus Miller can be considered that depicted the legal implications of counter offer (Casebriefs.com, 2016).
The above cited case presented a situation where in a defendant with death sentence for murder of a man requested the claimant to obtain pardon for this crime from the King. In return the defendant promised him to pay £100. The defendant never paid the amount promised to the claimant after he obtained pardon from the king through the efforts given by the claimant (E-lawresources.co.uk, 2016).
In this case the court favoured claimant’s position and also directed that the claimant is entitled for the promised amount and the defendant is obliged to pay the sum (E-lawresources.co.uk, 2016).
This case has highlighted the legal aspects of consideration with respect to a contract formed between the claimant and the defendant. However this consideration can be identified as a past consideration, as the promise to make the payment case after the performance. Important to note that in this case consideration was preceded by a request from the defendant’s side and hence the consideration in this respect is valid. In this case the court was found an implied promise to pay a sum of £1, 00 to the claimant. In this respect the case of Pao Ov Lau Yiu Long (1980) can be cited (E-lawresources.co.uk, 2016).
The facts in the cited case has revealed a situation where in an agreement was settled between John Tweddle and William Guy that John Tweddles’s son William Tweddle should be paid £100 by William Guy after marrying his daughter. The contract formed was written with a clause that granted John Tweddle the power to sue for enforcement of the agreement. However following the death of William Guy and John Tweddle he was unable to sue on the agreement and a compensation claim was preceded by William Tweddle against the executor of the will (E-lawresources.co.uk, 2016).
The decision presented by the Queen’s Bench division was not in favour of William Tweddle as William Tweddle was not involved in formation of the contract and the consideration did not move from him. Hence William Tweddle was not legally eligible to force the contract that was made between his father and his wife’s father.
Referring to the cited case it is important to highlight that third parties in a contract are not legally entitled to obtain any rights from the agreement not are entitled to bear the burden of such an agreement. Furthermore natural love and affection are not considered as sufficient to impose a consideration in a contract made. The case of Chappel versus Nestle (1960) can be cited that presented a case situation wherein consideration has some value (Webstroke.co.uk, 2016). The case of Stilk versus Myrick (1809) can be taken as an example wherein consideration was not sufficient (E-lawresources.co.uk, 2016). In accordance to a contractual duty already owned. The death of both John Tweddle and William Guy who were contracting parties also terminated the contract and hence William Tweddle cannot enforce the consideration.
The cited case revealed a situation where a minor’s husband in died recently and she although being a minor went into contract with the undertakers for arrangement of her husband’s funeral. After the funeral was over, the minor was found to refuse to bear the expenses and claimed that she do not have the capacity to the contract made (Casebriefs.com, 2016).
The decisions forwarded by the jury members were not in favour of the minor and she was held liable for paying the bill of her husband’s funeral (Casebriefs.com, 2016).
Analysing the case it can be stated that according to the Sale of Goods Act 1879 minors are held liable when they purchase their necessary items. Important to note that such necessaries are also extended beyond the essentials for daily living. However, the minors are not held accountable for the goods or services that are not delivered to them (Elliott and Quinn, 2001). In this case the minor was held liable to pay the bill of her husband’s funeral because of the fact that she was benefitted by the services provided by the undertakers. The funeral of her husband was arranged for her private benefit and it was considered as a necessary service in this respect. In return she owns the obligation to pay the bill. The case of Nash versus Inman (1908) also exemplified a minor’s liability related case but in this the minor was not held liable (Australiancontractlaw.com, 2016).
In contracts associated with sale of goods and supply of services basic provisions are found to be implied by statute with an intention to provide protection to the customers. Contractual terms are either expressly or implied in nature. According to English law implied term are defined as the practice of setting default rules for contracts and the primary objective to incorporate such terms is to ensure fairness in business. According to the legal guidelines of Unfair Contract Terms 1977, provisions of the Sale of Goods Act 1979 it is mandatory that the goods sold must be of satisfactory quality. However implied terms are again categorised into two distinct parts: implied in law and implied in fact. The latter address those issues that arise when they are strictly required to give effect in order to meet the reasonable expectation of the parties. Employment contracts and contracts related with tenancy are examples that include contractual terms implied by law (Elliott and Quinn, 2001).
Referring to the case scenario provided in L.O2.2 of task 2 it is observed that a car sales contract has been made between the seller and the purchaser named Paul. The contractual details have a number of implied terms. To begin with the seller is entitled for private sales according to Section 12 of the Sale of Goods Act 1979 and the seller has the right to sell the goods under Section 12 (1) of the same act. However under Section 12 (1) the seller is not legally entitled to sell those goods or services that would be a breach of trademark, patent or copyright. The case of Niblett versus Confectionaries Material (1921) can be cited (E-lawresources.co.uk, 2016). Apart from this the given sales contract has also an implied term that says that the car is free from any undisclosed charge or encumbrance. Section 12(12) of the same Act is applicable in this case. Moreover under Section 12 (2) (b) of the Sales of Goods Act 1979 it is implied that the Paul has the right to possess the concerned good. The case of Microbeads versus Vinehurst Road Markings (1975) is a good example in this respect (E-lawresources.co.uk, 2016). Further certain implied contractual terms according to Consumer Rights Act 2015 are also applicable in this case. If a breach of the contractual term is evident the Paul has the right to reject the good purchased without any time limit. This implied contractual term can act as a remedy for Paul and is applicable under Section19 (6) of the Consumer Rights Act 2015. it is also important for Paul to know that according to Section11 (1) of the Consumer Rights Act 2015 in s sales by description it is implied that the concerned good must match with the description and breach in this terms are subjected to legal penalties (E-lawresources.co.uk, 2016).
Therefore are the major implied terms that are associated with the sales contract of the car. Learning from the above mentioned information Paul can seek legal remedy for any damage or breach in contract if encountered.
Exclusion clause being one of the vital contractual terms can be implied in order to limit or exclude the liability of the defendant for the contractual breach. However in some of the statutory provisions the use of exclusion clause has been limited. It is to be noted that one of the major requirement for implication of exclusion clause is proper communication of the contractual term at the time of contract formation. In this respect the case of Olley versus Marlborough court hotel (1949) can be cited (E-lawresources.co.uk, 2016). Referring to the case scenario provided in L.O 2.3 of task 2 of the concerned assignment it is observed that a family has suffered both physical and material damage from the metal bar at the fun park and strand council’s refuse van in the car parking respectively. Jim and his family were identified as the injured party while the car parking area and the ‘fun park’ are the defendant in this case. Important to highlight that although both the defendants of this case has mentioned the exclusion clause statement but it was not properly communicated to the claimant party. Hence as previously mentioned proper communication that is the key requirement for implication of exclusion clause is missing in this case. Therefore the defendants are not limited from their liabilities (Horsey and Rackley, 2009).
It is advisable for Jim and his family to file for compensation for the damages they have encountered. It can be further added the case reflect a situation where in both the defendant parties did not obtain the attention of Jim and his family towards the statement printed on their tickets and signboard as an exclusion clause. In this respect the case of Thompson versus LMS Railways (1930) can be studied (E-lawresources.co.uk, 2016). It is to be further noted that oral statement by an employee can destroy the effectiveness of an exclusion clause which is not applicable in this case. The case of Curtis versus Chemical Cleaning Co. (1932) can be cited as a good example in this regard (Australiancontractlaw.com, 2016).
Hence on the concluding ground Jim and his family is advised to seek legal aid as exclusion clause is not applicable to limit the liability of the defendant.
The act of negligence in a business related activity can be explained as the failure to exercise duty of care that a reasonable or a prudent individual would do in the circumstances. In this context it is justified to highlight that negligence has rapidly developed into the cornerstone of our existing society applicable for claiming compensation as a remedy to the damage caused. Hence negligence can be rightly considered as a causal factor for damages. In this context it is also essential to understand the key difference between a tortious liability and contractual liability (Elliott and Quinn, 2001). Essential to convey, that the primary difference between tortious liability and contractual liability is in the characteristic of duty. The duties in the torts are fixed by the law while in case for duties in the contract are defined by the contractual parties involved. More stringency is imposed on addressing the tortious liability compared to that of contractual liability (McKendrick, 2005). Further a negligent action as a part of intentional civil wrong cannot be identified as a contractual liability and hence included under intentional torts. hence tort being a civil or private offense enable the judiciary body to compensate the plaintiff as a remedy while breach of contract are not considered to be a part of tort law automatically (Peel and Treitel, 2011).
Key element of negligence:
Duty of care:
Duty of care can be identified as one of the major element with respect to negligence and it is concerned with the association between the defendant and the claimant. If the defendant due to lack of duty of care performed a negligent action that subsequently caused damage to the claimant it can be considered as a tort. Hence duty of care can be developed provided the defendant and claimant are linked in one of the special relations or outside these relations in accordance to the legal principles of tort law. The case of Donohgue versus Stevenson (1932) is a good example in this respect (lawgovpol.com, 2014).
Breach of duty
Breach of duty is another element related with negligence. Important to convey, that breach of duty is not limited by the professionals or the individuals under the written or orally established contract. The society members also own duty of care (Peel and Treitel, 2011). An objective test is applicable for determination whether the defendant has truly performed breach of duty. The case of Vaughan versus Menlove (1837) can be reviewed (Casebriefs.com, 2016). However greater care is demanded if the risk of injury is found to be considerably high. The case of Glasgow versus Taylor (1922) can be cited (E-lawresources.co.uk, 2016).
If an individual has encountered injury that is directly caused by the defendant the concerned defendant is held accountable in this respect. However it is essential that the particular act or omission is resulted as a result of negligence from the defendant’s side. The ‘but for’ test can be performed in order to establish causation in the tort law. The case of Barnett versus Chelsea & Kensington hospital (1969) is a good example to be reviewed (E-lawresources.co.uk, 2016).
Remoteness of damage:
This particular aspect is associated with the requirement that the damage should be foreseeable in nature. Negligent claim by the claimant can be established if the defendant owns them a duty of care and evident supporting that breach in duty of care was incident. It is also essential to establish that the damage cause was not too remote. The Wagon Mound test is applicable in this respect (Cracknell, 2001).
Contributor negligence and volenti non fit injuria are the other element of negligence. The case of Sayers versus Harlow can be cited to understand the legal implications of contributory negligence while case of ICI versus Shatwell can be reviewed to study the legal aspects of volenti non fit injuria (E-lawresources.co.uk, 2016).
Vicarious liability in business related issues:
Vicarious liability is one of the major forms of liability frequently applicable for business organizations. Vicarious liability can be explained as a situation where in an individual is held accountable for the action or omission of another individual. Considering the example of professional domain usually the employer is vicariously liable for the acts or omissions of its employees. However the incident for which the employer is held vicariously liable should occur during the employment tenure of the concerned employed and should be related to the concerned organization. The concept of vicarious liability is justified by the fact that upper professional strata are responsible for controlling the activity of its subordinates. However for establishing vicarious liability it is essential to investigate that whether the individual held accountable for the tort an employee the defendant and whether the tort was incident during the course of employment. It is also important to state that employers cannot be held vicariously liable for the tort committed by the independent contractors. A number of testing procedures like test for employment status, control test, integration test and economic reality test are applicable in this respect (Peel and Treitel, 2011).
Hence an employer or an organization is held vicariously liable for the tort committed by its employee provided the employee has carried an authorised action is a negligent manner, the employer has permitted the employee to act negligently, the employee has executed an authorised act in an unauthorised manner and the employee has executed an act that had been already expressly forbidden (Cracknell, 2001).
In accordance to the Civil Liability (Contribution) Act 1978 a vicarious liability considers both the employee and the employer liable. The case of Lister versus Romford Ice and Cold Storage Co., (1957) can be reviewed in order to understand that under common law the employer is entitled to receive the damages from the employee but under certain situations (swarb.co.uk, 2015).
Hence in order to avoid the legal penalties due to vicarious liability is it beneficial for an employer to give equal opportunity to its working force with complete restrictions towards any type of workplace discrimination should provide active committeemen to its employees and should emphasise on restricting the execution of any kind of discriminatory activity within the organizational framework.
A bus driver unintentionally left the keys in his bus while parking it is a pay-by stand overnight. The bus was stolen from the parking area at the same night and was driven away. The negligent driving of the concerned individual who stole was bus caused an accident in which a woman was hit and killed. The defendant of the case was the concerned bus driver who left his bus unlocked in the parking area while the victim’s husband was the claimant who approached legal penalties for the damages suffered (Webstroke.co.uk, 2016).
In this case the bus company was not held responsible as its do not own a duty of care for the acts performed by a third party. The legal decisions also highlighted that the damage caused was not foreseeable in nature and was too remote (Elliott and Quinn, 2001). However it was foreseeable that the bus might be stoles as it was left with its key overnight in the parking area (Webstroke.co.uk, 2016).
In this cited case the concerned bus company cannot be held vicariously liable for the damages suffered to the claimant. Vicarious liability cannot be imposed on the bus company because the company cannot be held responsible for the acts performed by a third party also the damages suffered was not foreseeable and remote.
The case of Beard versus London General Omnibus Company (1862) can be cited wherein the concerned bus company was not liable for the conductor’s negligent act of driving the vehicle which was not his duty. According to the decisions of the court the plaintiff of this case failed to provide evidence that the conductor was authorised to drive the bus and hence failed to establish that the bus company is responsible for the negligent act of the concerned bus conduct (swarb.co.uk, 2015).
The decision for the above cited case was given by the House of Lords and the case is primarily about employment and transfer of employment. An insight into the case details and revealed an individual named Mersey Docks was appointed for proving training and also responsible for supply crane operator to organizations associated with the carrier business. In one of the occasions one of the Mersey Dock’s operators was who hired by a stevedore company caused injuries as a result of his negligent act of crane operation action important to highlight that the business contract signed between Mersey dock and the concerned stevedore company included the fact that the crane operator was an employee of the stevedore company (swarb.co.uk, 2015).
According to the judgement given by the House of Lords it was evident that the court found the agreement as to the employment was inconclusive as there were no documents supporting real transfer of the concerned employment. In this case transfer of employment was crucial because of the fact that the concerned crane operator was trained and also worked under Mersey Dock. Hence Mersey Dock cannot be said to have effectively transferred the tortfeasor’s employment (swarb.co.uk, 2015).
In this referred case a number of considerations can be included. one of the key question in this respect by whom the negligent employee was engaged, who paid salary to the concerned employee, who is entitled to dismiss the accused, who own the immediate control of the relevant work and who is responsible for monitoring the employee’s course of action (Elliott and Quinn, 2001). In this case as not transfer of employment was officially issues by Mersey Docks to some extent Mersey Docks can be held liable. Important to note, that Mersey Docks can be held responsible with respect to contributory negligence although remoteness is evident in this case. The case of Viasystems Ltd versus Thermal Transfer (Northern) Ltd and others (2005) can be cited. In this case the defendant subcontracted the task of installing air conditioner to the second defendant and he brought fitters from the third defendant. The fitters resulte a flood acting irresponsibility (swarb.co.uk, 2015). The case of Revill versus Newbery (1996) can also be considered that depicted a situation of contributory negligence (E-lawresources.co.uk, 2016).
On the concluding ground it is justified to convey that a sincere effort have been given to address the task requirement. An in depth knowledge can be acquired regarding the legal implications of contract law through the information provided in the previous segments.
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